The Dunwoody market is exceptionally hot, but the question many homebuyers are facing this year: “Why is it so hard to find a house?” is happening all over the country. We’re in the ultimate seller’s market, which means real estate is ultra-competitive for buyers right now. The National Association of Realtors (NAR) notes homes are getting an average of 4.8 offers per sale, and that number keeps rising.
Why? Low, low inventory. Simple economoics of supply and demand. Fewer houses to sell; more buyers than homes available. And all this is partially a factor of a decline in construction.
While many homeowners paused their plans to sell during the height of the pandemic, this isn’t the main cause of today’s huge gap between supply and demand. Sam Khater, Vice President and Chief Economist at Freddie Mac, Economic Housing and Research Division, shares:
“The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes . . . That decline has resulted in the decrease in supply of entry-level single-family homes or, ’starter homes.’”
When you consider the number of homes built in the U.S. by decade, the serious lack of new construction is clear (See graph below):The number of newly built homes is disproportionately lower than the rate of household formation, which, according to the U.S. Census Bureau, has continued to increase. Khater also explains:
“Even before the COVID-19 pandemic and current recession, the housing market was facing a substantial supply shortage and that deficit has grown. In 2018, we estimated that there was a housing supply shortage of approximately 2.5 million units, meaning that the U.S. economy was about 2.5 million units below what was needed to match long-term demand. Using the same methodology, we estimate that the housing shortage increased to 3.8 million units by the end of 2020. A continued increase in a housing shortage is extremely unusual; typically in a recession, housing demand declines and supply rises, causing inventory to rise above the long-term trend.”
To catch up to current demand, Freddie Mac estimates we need to build almost four million homes. The good news is builders are working hard to get us there. The U.S. Census Bureau also states:
The Bottom Line
If you’re planning to buy this year, the key to success will be patience, given today’s low inventory environment. Call me, Tom Florence, at 404-402-8062, and let’s talk strategy for your successful sale.